The Bitcoin (BTC) price rose 9.7% from July 13 to July 15, reaching around $63,500. The rally managed to reverse the previous nine days of losses, but the $65,000 resistance level remained unbroken for the fourth week in a row. Some traders attributed the recovery to speculation that China may lift its long-standing ban on Bitcoin. However, no official statement from the Chinese government has confirmed these rumors.
Bitcoin derivatives market is not optimistic
Despite the positive outlook, including major US presidential candidates expressing support for Bitcoin, BTC derivatives are not reflecting the same enthusiasm. Market participants are now wondering if there is enough demand to break the $65,000 barrier and if the weekend rally can continue.
Analysts have flatly denied the rumor, saying China will not allow its citizens to freely trade bitcoin using the local renminbi currency. Miko Otama, co-founder of algorithmic investment protocol Trading Strategy, emphasized that any major change in China’s stance on bitcoin would clash with the government’s political agenda of curbing “capital flight.” The experts also point out that Chinese investors are currently prohibited from investing in spot bitcoin and Ethereum exchange-traded funds (ETFs) in Hong Kong, despite its close ties to mainland China.
The Republican National Committee (RNC), which is headed by former US President Donald Trump, passed a draft policy platform on July 8. The platform aims to “defend the right to mine Bitcoin and ensure that all Americans have the right to keep their digital assets and trade them without government oversight and control.” It also accuses Democrats of engaging in an “illegal” crackdown on cryptocurrencies.
Will Clemente, founder of cryptocurrency research firm Reflexivity Research, suggested that Bitcoin’s weekend rally suggests that Trump is more likely to be elected as the next US president in November. The analyst also noted that Bitcoin’s bullish momentum increased during Trump’s Pennsylvania rally, which coincided with the former president surviving an assassination attempt. In essence, the market is expecting more favorable regulations compared to those currently implemented by the Biden administration.
To determine whether cryptocurrency traders are convinced that $63,000 will be a support level, it is important to analyze the perpetual futures funding ratio. This indicator, which is usually updated every 8 hours, reflects the demand for leverage from buyers (longs) and sellers (shorts). The positions on both sides are the same size, but a positive funding ratio indicates that longs are paying leverage.
The data shows a relatively neutral funding rate of 0.005% per 8 hours, which is equivalent to 0.10% per 7 days. This cost is negligible for most traders and is significantly lower than the 1.5% level associated with bullish markets. To further confirm the lack of optimism, it is essential to examine Bitcoin’s monthly futures.
Lack of investor enthusiasm can lead to surprising rallies.
Professional traders often prefer monthly contracts because they do not have a funding ratio. In a neutral market, these instruments trade at a premium of 5% to 10%, given the long settlement period.
Related: BTC Price Surges $63K as BlackRock CEO Calls Bitcoin ‘Legit’
According to the data, the BTC futures premium rose to 11% on July 15, surpassing the neutral range of 10% for the first time in nearly two weeks. This level suggests moderate optimism, which is especially encouraging considering that Bitcoin is still 14% below its March all-time high of $73,757.
Ultimately, traders should not be concerned about the perpetual contract funding ratio remaining stable. The less confidence investors have that the $65,000 level will be recovered, the greater the surprise effect, which tends to force the liquidation of short positions and further drive up prices.
This article does not contain any investment advice or recommendations. All investment and trading moves involve risk, and readers should conduct their own research when making decisions.